I am one of the nation’s leading thinkers on health policy. I am a Senior Fellow at the Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal calls me "the father of Health Savings Accounts." Modern Health Care says I am one of four people who have most influenced the changes shaping our health care system. I am the author of eight other books, including Leaving Women Behind: Modern Families, Outdated Laws; and Patient Power, the condensed version of which sold more than 300,000 copies and am credited with playing a pivotal role in the defeat of Hillary Clinton’s health reform. I have authored numerous editorials in The Wall Street Journal, USA Today, Investor's Business Daily, Los Angeles Times, and many others.I regularly appear on television, including CNN, CNBC and the Fox News Channel. I appeared on many William F. Buckley Jr. Firing Line shows, and was Mr. Buckley’s debating partner on a number of two-hour prime time debates – including such topics as the flat tax, welfare reform and Social Security privatization. I regularly brief members of Congress on economic policy and frequently testify before congressional committees. I am the author or co-author of more than 50 published studies on such topics as health policy, tax reform and school choice. I have an active speaking schedule and have addressed more than 100 different organizations on public policy issues. I received a Ph.D. in economics from Columbia University. I have taught and done research at Columbia University, Stanford University, Dartmouth University, Southern Methodist University and the University of Dallas. I received the prestigious Duncan Black award in 1988 for the best scholarly article on public choice economics.

Obamacare's Insurance Exchanges Will Foster A Race To The Healthcare Bottom

The Obama administration doesn’t seem to be bothered by this development. In fact they have been touting the fact that the premiums have been lower than expected, even though the reason is that the networks are narrower and skimpier than expected.

Think how different this is from what we were promised. During the 2008 election, every serious candidate for the Democratic presidential nomination repeated the “universal coverage” mantra repeatedly ― and on the left “universal coverage” means universal access to care. No candidate even hinted that access to providers might not be any better than it is under Medicaid.

Perverse incentive for insurance buyers.The penalty for not obtaining insurance is relatively small: $95 or 1% of your income in 2014. In future years it becomes larger, but for most people it will never come close to the cost of the health insurance they are required to buy. Further the enforcement mechanism is weak. All the IRS can do is withhold your income tax refund. It can’t garish your wages or attach an asset or even require you to pay a higher tax. And if you manage your affairs smartly, you will never be owed a refund.

As a result, the great fear of the Obama administration (and indeed the entire health insurance industry) is that millions of healthy people will decide not to enroll. This possibility is made more likely by a long, complicated enrollment form and an arduous enrollment procedure. Unless you are really sick and need health insurance right now, the temptation will be to wait to enroll until you have a health care problem. To make matters worse, the healthy, remember, are being over-charged from the git-go.

In Massachusetts, people who game the system are called jumpers and dumpers. They wait until they are sick to enroll (jump in). Then, after they get the care they need and get their medical bills paid, they dump the plan and disenroll. Of course, if the only people who have health insurance are people who are sick, the cost of insurance will go right through the roof.

To combat this possibility, the Obama administration has launched a desperate offensive ― attempting to enlist professional athletes, Hollywood actors, rock stars, librarians and anybody and everybody who can help persuade the healthy, especially the young and healthy, to join up. We’ll see how successful that effort is.

A better way. ObamaCare is not the only health program in this country that requires insurers to accept all comers, regardless of health condition, and forbids charging higher premiums to people with higher expected health care costs. That’s the way Medicare Part B (doctors’ services) works, as well as Medicare Part D (drug benefit) and Medigap insurance. None of these programs has a mandate or any penalty for not enrolling. Yet they all discourage gaming. In general people have to sign up when they are eligible and if they don’t they face higher (in some cases much higher) premiums when they do enroll.

If we structured ObamaCare the same way, there would be no need for a mandate and no need for a great many other bureaucratic burdens.

But to avoid other problems, we must do more. We must jettison the whole idea of community rating. This is preventing insurers from presenting buyers with real (risk-adjusted) tradeoffs between price and access or price and benefits. It’s this artificial pricing that causes a race to the bottom, not some inherent defect in the market.

What about pre-existing conditions? There is a better answer for that as well. It is called “change of health status insurance.” People would be able to buy insurance that protects them against the cost of getting a pre-existing condition — including paying the extra premium should they need to switch to another health plan.

Post Your Comment

Post Your Reply

Forbes writers have the ability to call out member comments they find particularly interesting. Called-out comments are highlighted across the Forbes network. You'll be notified if your comment is called out.